Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC sides with Clorox in Woodman’s price discrimination suit, (Nov 5, 2015)

By Greg Hammond, J.D.

The FTC filed an amicus brief in the U.S. Court of Appeals in Chicago this week, seeking reversal of a district court order denying The Clorox Co.’s motion to dismiss price discrimination claims brought by Woodman’s Food Market grocery chain (Woodman’s Food Market, Inc. v. The Clorox Co., Dkt. 15-3001).

Woodman’s is an employee-owned corporation that operates 15 retail grocery stores in Wisconsin and Illinois. Clorox manufactures and sells a number of consumer and professional products, including bleach, cat litter, charcoal, cleaning supplies, containers, personal care products, sandwich bags, water filtration products, and wraps.

Although Woodman’s had been a customer of Clorox for many years, Clorox announced in October 2014 that the grocery chain would be reclassified as a “general market retailer” and would be placed in a different “channel” than Sam’s Club and Costco. As a result, Woodman’s could no longer purchase large packs of any Clorox product, which are typically bought and sold at a lower unit cost than smaller packs of the same products. Woodman’s filed suit against Clorox, alleging price discrimination in violation of the Robinson Patman Act. The federal district court in Madison, Wisconsin denied Clorox’s motion to dismiss the price discrimination claims and later stayed the action pending interlocutory appeal.

The issue in this action, according to the FTC’s brief, is whether offering a package size qualifies as a promotional “service” under Section 2(e) of the Robinson Patman Act. In denying Clorox’s motion to dismiss the price discrimination claims, the district court erroneously agreed that large-sized packages are a promotional service subject to Section 2(e)’s categorical ban on price discrimination, the FTC claims.

“Properly understood, Section 2(e) does not generally require manufacturers to sell the same package sizes to all buyers who demand them; instead, it prohibits discrimination only in genuinely promotional services or facilities distinct from the product itself,” the Commission asserted. Because Woodman’s does not allege that Clorox offers its packages in large sizes primarily to convey a promotional message, Woodman’s does not raise a proper Section 2(e) claim, according to the brief.

Instead, Woodman’s claims that it is losing sales because consumers want large-sized packages. This, however, is not the type of discrimination covered by the Robinson Patman Act, the Commission suggests. In addition, the FTC argues that Woodman’s allegations that it must now pay a higher per-unit price for Clorox products than some rivals, placing it at a disadvantage in the retail marketplace, is the type of argument that belongs under Section 2(a) of the Robinson Patman Act, which prohibits direct or indirect price discrimination.

Companies: Woodman’s Food Market, Inc.; The Clorox Co.; The Clorox Sales Co.

News: Antitrust FederalTradeCommissionNews